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India and China to reshape the economic world in the 21st century

Fri, 16 May 2008 03:25:04 EST

India and China to reshape the economic world in the 21st century - by Drdutta

The 21st century may usher in a multi-polar world order, catalysed by the staggering economic success of two key regions that have been reshaping the global economic paradigm in recent years, much like Japan and the East Asian economies did from the sixties to the nineties.

China and India, or Chindia, will likely determine the contours of this world, now dominated by the economic might of the US and the European Union. If the burgeoning growth rates of these neighbouring economies are any indication, we could well be on the threshold of what many are calling, the ‘Asian Century’.

The facts are overwhelming. Chindia now represents two continental-sized economies with a total size exceeding $5 trillion, and growing at phenomenal speed; China grew by 11.4% and India by 9.6% in 2007. Their combined two billion plus populations (of which, the consuming middle-class represents the chunk), a relatively cheap yet skilled workforce, surging foreign exchange reserves and booming domestic companies with multinational appetites, are just pointers to its coming clout in the economic pecking order.

Given these realities, Chindia is already on a par with the US, the world’s largest economy, in certain respects. For instance, the two Asian giants already contribute 20% to the global gross domestic product growth, the same as that of the US. And by 2020, Chindia’s share in global growth is likely to go up to 40%, while the US’ share will hunker down to just 12-15%.

Incidentally, these Asian giants have achieved higher rates of growth for longer periods. For instance, between 1985 and 2005, Chindia recorded a growth of 5.3% per annum. This closely parallels that of Japan during 1960-85 and is only 1 percentage point less than what Korea and Taiwan achieved during 1970-95.

The big difference, of course, has been that Chindia has had a population that was several times larger than Japan, Korea or Taiwan. Again, what will also help these two countries shape the Asian Century is their demographic profile. Remember, by 2020, India will be the youngest country in the world with around 547 million people below the age of 25, although China will have a much larger aging population.

Inflation war in India

Fri, 16 May 2008 03:17:27 EST

Inflation war in India - by Drdutta

Even if they had planned it, India’s premier policy making duo could not have synchronized it better. On April 29, Finance Minister P Chidambaram announced a slew of measures aimed at taming inflation. Among other things, he imposed an export duty on some kinds of steel products, did away with import duties on it, and also on some inputs like zinc and metallurgical coal.

At the same time, Reserve Bank of India Governor Y Venugopal Reddy, was announcing a 25 basis point hike in the Cash Reserve Ratio (CRR) in order to suck out excess liquidity from the system. (Most recently, a fortnight ago, the RBI had hiked CRR by 50 basis points.) In his annual policy statement, Reddy also placed a lot of emphasis on the target to mow down inflation, which was at an uncomfortable 7.4%, to 5.5 per cent in 2008-09.

The two separate moves sent out one strong message: it is now all out war on inflation.

The posturing aside, two questions remain. Is this enough to curb inflation? And if not, how much more can be done without tripping India’s growth story?

Inflation is a global phenomenon. Persistent commodity price increases have made monetary policy management unusually difficult across emerging markets. The triumvirate problem of rising food prices and fuel prices, and global financial instability, is bothering central bankers worldwide. Experts wonder how can RBI tackle this global menace merely by tightening domestic liquidity, especially since it seems reluctant to allow too much market-led rupee appreciation, which could help neutralise imported inflation.

Interesting time for Indian television industry

Fri, 16 May 2008 03:10:07 EST

Interesting time for Indian television industry - by Drdutta

The Indian television industry, which has about 300 channels in operation today, is on the threshold of a massive expansion. It grew 18% in 2007 to Rs 22,600 crore, according to a PricewaterhouseCoopers (PwC) report on the Indian entertainment and media industry. And with 200 new channels slated for launch this year, the size will reach gigantic proportions. There will, however, be a shakeout that will see some channels close, while others are taken over. One way or the other, the sector has interesting times ahead.

The PwC report says that television will continue to be the major contributor to the entertainment and media industry’s revenue pie over the next five years. It projects healthy 22% year-on-year growth for the period, which translates into an industry worth Rs 60,000 crore by 2012. Similarly, the TV advertising industry is expected to grow to Rs 20,000 crore in 2012, from its current size of Rs 8,000 crore, while the television distribution industry is expected to reach Rs 38,000 crore in 2012.

With as many as 200 new channels expected to beam out this year, and the number of pay television households projected to grow from 74 million in 2007 to 115 million in 2012, the mood in the TV industry is bullish. With the cost of running a channel escalating year after year, a number of investors are finding it an extremely risky proposition to invest in the broadcasting business.

In order to grow beyond this market reality and survive, broadcasters need to be innovative and think out of the box, not only in terms of coming up with great differentiated content, but also looking in terms of creating newer avenues of revenue generation.

Role of microfinance incubators in India

Wed, 14 May 2008 04:10:56 EST

Role of microfinance incubators in India - by Drdutta

From a microfinance institution’s point of view, India, it would seem, is a nation

divided. While nearly, 7.5 million poor people in the southern and eastern parts of the country have access to micro-credit, only around 350,000 people in the north and west have managed to do so. This state of affairs could lead to lopsided economic growth, unless something is done fast.

That is precisely what a clutch of institutions—called microfinance incubators—are now doing by coming up with an innovative solution to correct this imbalance.

These incubators have one purpose—to develop and deploy microfinance entrepreneurs and institutions into regions where the poor still remain untouched. Already, three such organisations—the Indian Institute of Management, Bangalore (IIMB), ICICI Bank and ABN Amro Foundation India—have incubated almost 35 microfinance institutions (MFIs). The result of this experiment suggests that the number could soon multiply.

Typically, microfinance incubation programmes involve a mix of classroom and on-field training. Emphasis is placed on teaching entrepreneurs how to develop systems that will help them manage a growing business and facilitate innovations in distribution, training, and managing the hundreds of foot soldiers these incubators will employ later on. If successful, this incubation effort has the potential to change the credit climate of India’s rural poor.

Allance between Ranbaxy Laboratories and Orchid chemical

Wed, 14 May 2008 04:06:45 EST

Allance between Ranbaxy Laboratories and Orchid chemical - by Drdutta

After days of speculation and denials , Ranbaxy Laboratories and Orchid chemicals finally announced an alliance "involving multiple geographies and therapies for both finished dosage formulations and active pharmaceutical ingredients." But what does this agreement actually mean on the ground?

In my opinion, deal unites Orchid’s manufacturing capabilities in Cephalosporins (a new generation of antibiotics) and Carbapenems (antibiotics administered intravenously in hospitals for serious infections) with Ranbaxy’s marketing prowess and wide geographical reach.

Orchid has FDA certified manufacturing plants in addition to a wide range of product offerings in Cephalosporins and Carbapenems, but it lacks the front-end to market them. This is exactly where Ranbaxy scores—over the years, it has invested heavily to build a marketing and distribution network across geographies. This is why the alliance is good for both firms.

But can this alliance lead to a full-fledged acquisition by Ranbaxy? After all, Orchid’s promoters hold only a 22.7% stake of the company’s 65.8 million shares—the rest is held by corporate bodies (49.9%) and the public (27.4%). Moreover, Ranbaxy recently bought a 14% stake in the Chennai-based firm through its group company Solrex. A push beyond 15% will trigger the open offer clause (to acquire another 20% from existing shareholders), which would mean an additional outgo of Rs 309 crore at Orchid’s prevailing stock price of Rs 235.

India's truck and commercial vehicles industry

Wed, 14 May 2008 00:15:29 EST

India's truck and commercial vehicles industry - by Drdutta

If you liken India's truck and commercial vehicles industry this year with a high stake round of famous card game, poker, the comparison wouldn’t be misplaced. For one, the central pot has a whopping Rs 13,174 crore—that’s how much money Indian and global manufacturers are pumping in to build fresh capacity and expand operations, largely over the next 24 months. This burst of investment will see the industry add fresh capacity of 600,000 trucks, at a time when total sales are at about half a million a year.

Second, their capacity plans are also coming into effect at a time when the industry has crawled during the last fiscal year at 4.85% and stagnated in the last six months (medium- and heavy-goods carriers, in fact, saw sales drop by 1% in the same period). The risk is compounded considering that the industry was not able to sell over 10% of its production in 2008 (excluding dealer inventories). With growing fears of a possible slowdown in the economy (transport freight has remained flat since January, after a 4-6% drop in December 2007), many are wondering if these mega-investments are being made at the wrong time of the economic cycle. Lastly, there are uncontrollable factors such as an unfavourable interest-rate regime and rising prices of inputs like steel. With more than 70% of a commercial vehicles cost depending on raw material prices, players could bleed in the face of competitive pricing, especially if there is a capacity glut.

Indian real estate majors in hospitality sector

Wed, 14 May 2008 00:11:00 EST

Indian real estate majors in hospitality sector - by Drdutta

By 2015, if all goes as planned, Indian real estate majors – DLF, Emaar and Unitech – will have more hotel rooms than the established hoteliers.

DLF Ltd, the country’s largest real estate company by market cap, had just announced a $400 million deal to take over Aman Resorts, a chain of 22 luxury hotels and spas spread across 12 countries. Clearly, DLF is a serious player, given that it plans to spend $5 billion to build 125 hotel properties with 25,000 rooms over a seven-year period.

DLF is not the only real estate player in a hurry to build hotels in the country. EmaarMGF has lined up nearly Rs 12,000 crore to build 26,000 hotel rooms in the next 10 years, having already tied up with a host of international players to manage and operate these hotels. They include haute couture Armani Hotels, Marriott International, Premier Inn, Accor, Four Seasons, Hyatt Group and InterContinental Hotels Group.

Unitech, the country’s second largest real estate company, plans to build 35 hotels containing 5,800 rooms in all, over the next five years. Capex for construction has been pegged at Rs 2,400 crore.

What is the difference between futures and options?

Mon, 12 May 2008 03:16:31 EST

What is the difference between futures and options? - by Drdutta

What is the difference between futures and options?

An option gives the buyer the right but not the obligation, while the seller has an obligation to comply with the contract. In futures, both the buyer and seller have an obligation to honour the contract
A call or put options can lapse,
but if you choose to exercise it, the counter-party (seller) must comply. A futures contract, on the other hand, is binding on both buyer and seller and it has to be settled on or before the expiry date
The purchase of a futures contract involves a larger cash outflow than options, where one pays the premium
A futures contract carries unlimited profit and loss potential, whereas the buyer of a call or put option has limited losses but unlimited profit potential
Futures are a favourite with speculators and arbitrageurs, while options are widely used by hedgers

How futures and options work in a volatile market like India

Mon, 12 May 2008 03:15:10 EST

How futures and options work in a volatile market like India - by Drdutta

How futures and options work in a volatile market like India

Two- or three-year options are a reality and could prove useful for the long-term investor
A long straddle, or a long strangle are good options to use in a volatile market
Learn the art of arbitraging.buy in the cash market, short-sell in the futures market
Due to intra-day volatility, there is a danger of a stop-loss trigger first in the cash market. Therefore, choose an option where the strike price premium equals the stop-loss. This will not only limit the losses but gives an opportunity to stay in the market and gain from the rise
Hedge about 60 per cent of your portfolio using Nifty futures, instead of averaging in the cash market

Oil is on the boil again

Mon, 12 May 2008 03:12:07 EST

Oil is on the boil again - by Drdutta

Oil is on the boil again because of soaring crude prices. At $120 (Rs 4,800) a barrel, crude prices are up more than 300 per cent from their 2003 levels (it was at $28 per barrel in 2003 and $45 a barrel in 2004).

A lot of this rise has happened during the first four months of 2008. Rising demand from India and China, coupled with a supply crunch, is driving prices through the roof. As oil gathers momentum, it brings opportunities as well as challenges for companies operating in this sector.

For oil and gas production companies that cater to the overseas market as well as for oil equipment suppliers, there’s plenty of good news. It’s now obvious that the focus is going to be on energy in the coming years. And investors must be a part of the action.

But not all companies will benefit from the oil boom. High oil prices will benefit companies in the exploration segment like ONGC and Cairn. The subsidy bill has been soaring over the past few years. In 2006-07, ONGC’s subsidy burden stood at Rs 17,025 crore, while it was Rs 1,487.59 crore and Rs 1,993.75, respectively, for GAIL and OIL. At the same time, the subsidy burden of upstream oil companies rose 156 per cent to Rs 6,447.5 crore over the last one year. This year, it is expected to go even higher.

The sector is also seeing an increase in exploration activities and other services, which, in turn, have propelled the demand for services like drilling rigs and logistics suppliers. A shortage of rigs has resulted in huge windfalls for companies like Aban Offshore and Great Offshore.

TVS Motor posts 4.80% rise in April sales

Fri, 02 May 2008 04:42:17 EST

TVS Motor posts 4.80% rise in April sales - by Drdutta

TVS Motor, India's no. 3 motorcycle maker reported 4.80% growth in two-wheeler sales in April by ending 13-month drop in sales to 109,937 units as against 104,893 units sold in previous year period. Shares of TVS Motor gained soon after the announcement by Rs 3.1, or 7.18%, to trade at Rs 46.25.

In terms of statistic, sales of motorcycle climbed nearly 9% to 58,202 units and scooter sales rose marginally by 1.26% over last year period to 19,034 units. Exports grew nearly 41% to 10,213 units in April 2008 compared with 7,231 units sold in prior year period. The stock has shown a rise of 11.12% over the week and 17.61% over a month.

According to sources, company is all set to further strengthen its premium segment with the launch of the 'fuel injection' variant of 'Apache RTR'. It will be the first time that the company is offering fuel injection technology in the 160 cc category.

India`s exports miss FY08 target

Fri, 02 May 2008 04:37:43 EST

India`s exports miss FY08 target - by Drdutta

As I predicted months back, India's merchandise exports missed the annual target of US$160bn but I think that the performance is still commendable given the steep increase in the rupee last year, a US-led global slowdown and the worldwide credit crunch.

Figure wise: Exports of goods for the year 2007-08 jumped 23% in dollar terms to US$155.51bn while imports were up 27% to US$235.91bn, taking the trade gap to US$80.4bn from US$59.32bn in the previous fiscal year. On the other hand, growth in exports was 9.39% in rupee terms while imports grew nearly 13% in local currency.

Oil imports during the year ended March 2008 were up 35.28% at US$77.03bn while non-oil imports 23.36% at US$158.88bn. Exports during March climbed 25.59% to US$16.28bn, while imports grew 35.24% to US$23.17bn, resulting in a higher trade deficit of US$6.9bn as against US$4.3bn in the same month a year earlier. In rupee terms, exports were up 16% in March, while imports rose almost 24%.Oil imports during March surged 77% to US$8.63bn while non-oil imports were up 19% at US$14.54bn.

Inflation in India touches 7.57% mark

Fri, 02 May 2008 04:32:21 EST

Inflation in India touches 7.57% mark - by Drdutta

It's official, inflation galloped to 42-month high of 7.57 per cent for the week ended April 19 as compared to 7.33 per cent a week ago mainly due to higher prices of food articles such as rice, milk, tea, vegetables and some manufactured products. On the other hand, the wholesale price based inflation stood at 6.07 per cent in the corresponding week a year ago. It is worthwhile pointing that the previous high of 7.76 per cent was recorded for the week ended November 2, 2004.

In terms of statistic, during the reporting week, prices of tea shot up by 17 per cent, even as other food items like milk, rice, vegetables and mutton became dearer. Among other commodities, the prices of Light Diesel Oil and furnace oil went up by 2 per cent and by 1 per cent respectively.

Talking about the manufactured products category, cast iron pipes jumped by 51 per cent, pig iron by 8 per cent and steel sheets by 2 per cent. Point to be noted here is that the annual rate of inflation, on the basis of Wholesale Price Index (WPI), has been increasing despite fiscal and monetary measures taken by the Indian government recently.

While the Indian government has banned export of certain commodities such as non-basmati rice and pulses and minimized customs duties on number of other items to rein in inflation, the Reserve Bank of India has increased the Cash Reserve Ratio (CRR) to suck excess liquidity from the market.

Ashok Leyland to invest Rs 3000 crore

Thu, 01 May 2008 05:06:34 EST

Ashok Leyland to invest Rs 3000 crore - by Drdutta

I have got the information that Ashok Leyland is going to invest Rs 3,000 crore for a new plant in Uttarakhand and expand capacity at its Ennore facility in Tamil Nadu. According to company sources, the Hinduja group’s flagship company is setting up a 50,000-unit capacity plant in Uttarakhand, that gives income tax and excise breaks to investing companies.

What's more, fresh investments would also be used for new engine development in partnership with Austrian firm AVL. Rs 1,000-1,500 crore will be funded through internal accruals, whereas around Rs 800 crore would be raised in the form of debt, possibly from overseas market. According to sources, company had raised $200 million via external commercial borrowings, out of which, $20 million have already been spent.

The company is also developing two projects out of the country including one bus body building facility in Ras al Khaimah (the UAE) and another in Dubai for special purpose vehicles (SPVs).

RCom Q4 net profit up 47%

Thu, 01 May 2008 05:00:49 EST

RCom Q4 net profit up 47% - by Drdutta

According to media reports, Reliance Communications reported a 47 per cent growth in its net profit at Rs. 1,503 crore for the quarter ended March 31, 2008. The turnover over the same period was up 35 per cent at Rs. 5,311 crore.

In terms of statistic, during the period, the company’s businesses posted healthy growth with the wireless business up 40 per cent at Rs. 4,161 crore, global business 18 per cent at Rs. 1,526 crore and broadband business 54.5 per cent at Rs. 510 crore. The operating profit was up 42 per cent at Rs. 2,316 crore and operating margins improved to 43.6 per cent.

On the other hand, for the financial year 2007-08, the company reported a 71 per cent higher net profit at Rs. 5,401 crore ($1.350 billion) on 32 per cent higher revenues of Rs. 19,068 crore. The operating profit was up 43.3 per cent at Rs. 8,199 crore with strong contributions from all its businesses. RCom had announced a capital expenditure plan of Rs. 45,000 crore over 2007-08 and 2008-09. It had already spent Rs. 21,000 crore and would spend the balance Rs. 25,000 crore ($6 billion) in the current year.

RCom at this moment of time operates GSM services through Reliance Telecom in eight circles.

The company has ventured into the information technology (IT) sector by creating Reliance Technology Services which will focus on specific verticals of telecommunications, financial services, media and entertainment and utilities. It will initially service group companies and later serve external companies.

GDP growth of India cannot be below 8%

Thu, 01 May 2008 04:55:24 EST

GDP growth of India cannot be below 8% - by Drdutta

In my opinion, GDP growth of India cannot be below 8%. Point to be noted here is that Investment demand is strong, while consumer demand is marginally less. I would be surprised if growth falls well below 8%. If growth slips then it will be possible to jumpstart the economy. However, the major shock for growth could be fuel.

I expect a marginal reduction in inflation in the next 2-3 months. Using the rupee to control inflation is a good intellectual proposition. The exchange rate is market determined and hence is not an instrument. 5.5% inflation seen only by March 2009.

The Statutory Liquidity Ratio has to come down in the medium-term. Domestically there are underlying demand pressures but there is also been a supply shock in the last one-quarter. Globally, what will happen after 4-5 months is that people are uncertain about the type of impact on the economy. So, when there are too many uncertainties, you don't get locked in an instrument. But it doesn't mean that it should not be used. Something has not been used today, or anything that is used on a particular day depends on the concentration, uncertainties, the instruments, and appropriate flexibilities.

Grasim Industries Stock

Wed, 30 Apr 2008 06:19:07 EST

Grasim Industries Stock - by Drdutta

Grasim Industries stock dipped by 6.12% post-announcement of results on a day the Sensex was up 2.13%. In terms of statistic, margins of two key businesses, fibre & pulp and cement, accounting for 87.9% of consolidated revenues for the March quarter, have shrunk on a year-on-year basis. According to company sources, margins of the fibre & pulp business (viscose staple fibre and wood pulp), which contributed 17.5% of the revenues, dropped to 20.70%.

Total consolidated revenues grew by 15.2% over the same period last year to Rs 4,714.66 crore. Operating profit margins decreased by 301 basis points to 25.39%. Grasim accounted Rs 236.68 crore as extraordinary items in relation to the 53.63% stake sale in Shree Digvijay Cement. Excluding that, net profit grew by 11.58% to Rs 751.43 crore.

I expect the cement business to be under pressure and that does not augur well for Grasim given that it derives 70.4% of its revenues from cement.

Strides Arcolab raises equity stake in Genepharm

Wed, 30 Apr 2008 06:09:40 EST

Strides Arcolab raises equity stake in Genepharm - by Drdutta

According to media reports, Strides Arcolab has acquired more than 17.7 per cent in ASX-listed Genepharm Australasia under a share acquisition agreement with a group of Cyprus-based shareholders that are associated with Genepharm's largest shareholder, Genepharm Asia Pacific Enterprises.

According to sources, Strides will vend its Australian and Asian business in exchange for the issue of shares in Genepharm. Including the existing 2.1 per cent of Genepharm shares over which Strides currently has a relevant interest, the transaction takes Strides' total relevant interest in Genepharm issued shares to 19.8 per cent.

The combined regional businesses are expected to have revenue of A$ 100 million on closing of the Genepharm transaction. It is worthwhile pointing that the purchase consideration for the acquisition of Strides' Australian and Asian operations has been reduced from A$65.0 million to A$61.0 million, with Genepharm proposing to assume A$4.1 million of existing debt within the business.

No FDI in Indian retail sector

Wed, 30 Apr 2008 02:21:13 EST

No FDI in Indian retail sector - by Drdutta

I have a full-proof information that Indian government would not allow any foreign direct investment (FDI) in the retail sector. In addition, the government is open to review the Special Economic Zones (SEZ) Act if the need arose.

India would not succumb to pressure from the West during World Trade Organisation (WTO) trade talks and the government was committed to safeguarding the interests of farmers, industry and other sectors.

In terms of statistic, almost 97 per cent of the retail business in India is in the unorganised sector and nothing would be done that could lead to job loss or have an adverse impact on those involved in this sector.

So far around 80 SEZs had become operational; when this number reached 100, the government would carry out a detailed review to find out whether the law needed to be strengthened further. In my opinion, it is wrong to compare Indian SEZs with those set up in other nations. So far, there have been encouraging results. Exports from SEZs are projected to go up to Rs.1.24 lakh crore this fiscal compared to Rs.65,000 crore in 2007-08. It has so far produced over 1.6 lakh jobs and attracted investments worth over Rs.67,000 crore. It has succeeded in generating tremendous economic activity in the country.

3i Infotech buys Regulus

Wed, 30 Apr 2008 02:07:43 EST

3i Infotech buys Regulus - by Drdutta

According to media reports, IT software and services provider 3i Infotech has acquired Regulus Group, a US-based payment and document processing company, for nearly $100 million. I have no doubt in my mind that this would increase the Indian company’s overseas presence, besides increasing its revenue. According to sources, the cost of the acquisition is approximately $80 million, with an additional $20 million based on earn-outs linked to its performance in the next two years.

The acquisition is an all-cash deal, funded by debts raised on Regulus and guaranteed by 3i Infotech, to be serviced over a period of seven years. Initial signs are that the company plans to close the deal within three months.

For 3i, this acquisition would help them in increasing their footprint in the payment processing industry both in the US and in emerging markets like India and China. It also allows them with cross-selling opportunities to Regulus’ BFSI (banking financial services and insurance) clientele. At this moment of time, the BFSI space accounts for 48% of Regulus’ total clients. 3i Infotech currently earns $130-140 million in revenue from its US businesses.

LG to invest Rs 480 crore in India

Fri, 18 Apr 2008 00:31:19 EST

LG to invest Rs 480 crore in India - by Drdutta

LG Electronics India Private Limited is all set to invest Rs 480 crore during the calender year 2008. According to sources, the company would spend Rs 360 crore towards brand building, while Rs 120 crore would be invested for product development.

LG enjoys market leadership position across segments, is aiming at 15 per cent growth during the current calender year. The key growth drivers for LG would be laptops, GSM phones and other premium category products. The present market share of the company in the household appliances and electronics segments was ranging from 20 per cent to 34 per cent. Indications are that company would enter the air purifiers and wine sellers market in India. LG had earned an export turnover of $230 million in 2007 and is targeted at $300 million in 2008.

India contributes 6 percent of LG Electronics global revenues of $42 billion. LG products would see a two to three per cent price rise in the next couple of months, as input costs, particularly for refrigerators and washing machines, had risen considerably.

Parsvnath, Saffron Group ink pact for Rs 620 crore depot project

Fri, 18 Apr 2008 00:21:09 EST

Parsvnath, Saffron Group ink pact for Rs 620 crore depot project - by Drdutta

Leading realty firm Parsvnath Developers has tied up with two Saffron Group managed funds for a bus depot development project valued at Rs620 crore through a special purpose vehicle.

The two funds, Yatra Capital and Saffron India Real Estate Fund I (SIREF I), have signed agreements with Parsvnath for picking up 15% stake each in the company’s SPV through an investment of Rs186 crore.

The investments value the entire project at Rs620 crore. The SPV named Jarul Promoters & Developers Pvt Ltd would undertake development activities which involve planning, designing, constructing and re-modelling a fully equipped BEST bus depot in Mumbai. The project would also include staff housing and constructing buildings for commercial utilisation. It is worthwhile pointing that the company was awarded the development rights under a tender process for the 30,820 square metres of land in Kurla, Mumbai.

Through the SPV, the company is planning to build the complex with state-of-the-art infrastructure setting a benchmark for the area. In August last year, Parsvnath had bagged redevelopment project for Mahim Bus Terminus, Mumbai, with a developable area of 40,000 sq ft from BEST for commercial and residential utilisation along with remodelling of the existing bus station.

GMR Energy acquires 5 per cent stake in South African coal firm.

Fri, 18 Apr 2008 00:17:29 EST

GMR Energy acquires 5 per cent stake in South African coal firm. - by Drdutta

According to sources, GMR Energy, the energy division of GMR Group, has picked up a 5% equity stake in mining company Homeland South Africa (HSA) for a consideration of $15 million. As per the deal, GMR would have an option to acquire 45% stake in the company at a later date for $145 million.

It is worth mentioning in this regard that if the option is exercised by September 2, 2008, the total transaction value would be $155 million for the purchase of a total 50% stake. The South African company is a subsidiary of Toronto-based Homeland Energy Group that has coal and uranium mining interests in Southern African countries and Canada.

In my opinion, the deal is significant for GMR as this would would give its an access to HSA’s mining properties in South Africa. Its properties in the country includs the Kendal Mine, Eloff coal mining project, the Northfield site reclamation project. What's more, the deal may help GMR to explore the possibility of setting up a power project within South Africa as coal produced from HSA’s mines could be easily made available to it.

The present transaction, however, excludes Homeland Energy’s interests in Homeland Uranium, Altona Resources and other projects under consideration in South Africa. According to experts, the coal project is expected to generate a production of 13 to 15 million tonne (MT) per annum. GMR would have access to 50% of this production that could be brought to India for use in company’s coastal power projects.

Wipro Q4 results

Fri, 18 Apr 2008 00:11:49 EST

Wipro Q4 results - by Drdutta

Wipro Ltd, India's third-biggest software services exporter, announced its Q4 results.

Wipro, which offers IT solutions such as system integration, software application development and back-office services, Q4 consolidated net profit was up at Rs 880 crore (Rs 8.8 billion) versus Rs 851.1 crore (Rs 8.51 billion), QoQ.

Its consolidated net sales was up at Rs 5,691.9 crore (RS 56.92 billion) versus Rs 5,339.6 crore (Rs 53.4 billion), QoQ.

Its FY08 consolidated net profit was at Rs 3,282.90 crore (Rs 32.81 billion) and consolidated net sales was at Rs 20,019.50 crore (RS 200.19 billion).

Wipro reported its earnings after India's number 2 software exporter, Infosys Technologies posted a near-10 percent rise in profit and gave a confident medium-term outlook, but sounded a note of caution on its near-term prospects. In my opinion, growing evidence of a U.S. recession is a major concern for India's $64 billion software services sector, which gets more than half its revenue from the world's largest economy.

Indirect tax collections in India touches Rs 2,79000 cr

Thu, 17 Apr 2008 09:00:25 EST

Indirect tax collections in India touches Rs 2,79000 cr - by Drdutta

Indian government has surpassed the revised indirect tax collections targets for 2007-08 as the revenues from customs, excise and service tax touched about Rs 2,79,000 crore. According to sources, the government has already achieved the direct tax collections of about Rs 3,12,000 crore for 2007-08, surpassing the revised target of about Rs 3,05,000 crore, and the total tax collections stood at around Rs 5,91,000 crore for the fiscal.

Point to be noted here is that total indirect tax collections included customs collections of around Rs 1,04,000 crore, excise collections of around 1,25,000 crore and service tax amounting to over Rs 50,000 crore as on March 31, 2008. A slowdown in industry coupled with import duty cuts on edible oils and corn last month fueled speculation that the indirect tax collections may fall short of target.

India has recently cut duties on edible oils and corn, banned exports of non-basmati rice and cement and withdrew incentives for steel and cement exports to increase supplies and tame inflation, which hit a three year high of 7.41 percent in March.

Bhuwalka Steel acquires shares in Benaka Sponge

Thu, 17 Apr 2008 08:52:10 EST

Bhuwalka Steel acquires shares in Benaka Sponge - by Drdutta

According to media reports, Bhuwalka Steel Industries has acquired 2.99 lakh equity shares at a price of Rs 334 per share in Benaka Sponge Iron Pvt Ltd (BSIPL) in a cash deal of Rs 10.02 crore.

BSIPL is strategically located in Belagal Village in Bellary, having close proximity to iron ore belt yielding logistic advantage. The acquisition would enable the company to have backward integration and have synergy with its operations.

In terms of statistic, BSIPL had posted a turnover of Rs 40.21 crore with a profit after tax of Rs 2.02 crore during 2006-07. The acquisition would enable Bhuwalka Steel Industries to produce steel through primary route by integrating the operations to improve, margins.

In its next phase, the company is planning to generate power through hot gas recovery and plans to enter into green power generation by setting up a 10-12 mega watts power plant with waste heat as feed stocks along with chardust and coal.

Inflation falls to 7.14 % in India

Thu, 17 Apr 2008 08:11:15 EST

Inflation falls to 7.14 % in India - by Drdutta

Trying hard to combat price rise, the Indian government finally received some respite with the inflation rate easing to 7.14 per cent during the first week of the current financial year. Giving credence to the numerous steps taken by the Indian government to tackle the surging prices, the official data clearly revealed that inflation softened by 0.27 per cent during the week ending April 5, down from a 40-month high level of 7.41 per cent a week ago. The inflation rate was 6.44 per cent a year ago.

According to sources, the wholesale price based inflation declined on account of easing of prices of fruits, gur and certain edible oils. The prices of vegetables, tea, pulses and coconut oil, however, continued to rise during the reporting week. In the non-food category, the prices of steel alloys and aviation turbine fuel too remained firm.

In my opinion, the main reason behind the decline is direct fiscal steps taken by the government to check prices. In other words, rate of increase in prices in a number of food and manufactured items like edible oil, iron and steel have come down . Part of the decline, could be attributed to base effect as the annual rate of inflation for the corresponding week last year was quite high at 6.44 per cent. The Reserve Bank, may tighten monetary policy by hiking Cash Reserve Ration (CRR) as the inflation rate is still higher than its comfort level of 5 per cent.

3i raises $ 1.2 billion infra fund

Wed, 16 Apr 2008 09:20:53 EST

3i raises $ 1.2 billion infra fund - by Drdutta

3i, a global private equity investor, has raised Rs 4,800 crore ($1.2 billion) India-focussed infrastructure fund called '3i India Infrastructure Fund', it will invest in core sector companies and projects.3i has raised 20% more than its target of $1 billion for the fund.

It is worthwhile pointing that the Fund has obtained commitments from 16 partners of ten countries across Europe, North America, Asia and the Middle East. FTSE-listed 3i Infrastructure and 3i are the largest investors, each committing $250 million to the fund, a announcement from the fund said today.

According to experts, targeting around ten investments over the investment period, the fund's has invested $227 million (nearly Rs 908 crore as of today) in Adani Power, and $101 million (nearly Rs 400 crore) in Soma Enterprise, which developd infra projects build-operate-transfer (BOT) projects.

Last year, 3i formed a strategic partnership with the Infrastructure Finance Corporation (IIFCL) to finance infrastructure projects in India. In my opinion, the closure of this fund significantly above target represents a major milestone for 3i and will enable projects with a capital value of up to $5 billion to be completed.

HCL Technologies Q3 net revenue up

Wed, 16 Apr 2008 09:11:35 EST

HCL Technologies Q3 net revenue up - by Drdutta

According to media reports, HCL Technologies has witnessed a growth of 33.8 percent to sustain their profitability for the third Quarter of the financial year ending 31 March 2008 despite global economic slowdown.

In an Infosys led rally, HCL has demonstrated growth in revenues which was at $484.9 million up by 33.8 percent, IT service revenues was at $428.5 million up by 37% and the BPO revenue stood at $56.5 million up by 13.6% year on year for this quarter. The earnings per share was $0.50 million signalling that the market need not worry.

Forex loss worth $6.8 million, however, was registered which has been attributed to the appreciation of the Rupee. A net head count addition of 1848 employees and an interim dividend of 100% for this quarter was also announced.

HCL technologies has added eleven $1 million deals and larger deals worth $500 million spread across five deals covering telecom, financial services, hi tech verticals US, Europe and Australia geographics is also on, making this one of the most profitable quarters for them. HCL’s quarterly EDITDA margins rose to 22.3 per cent from 21.4 per cent in the second quarter ended December 31,2007, but lower than 23.3 per cent a year ago.

Reserve Bank of India: Indian market not exposed to global crisis

Wed, 16 Apr 2008 09:06:46 EST

Reserve Bank of India: Indian market not exposed to global crisis - by Drdutta

Amid fear of global slowdown and its impact on the world economy, the Reserve Bank of India (RBI) is of the opinion that Indian financial market is not vulnerable to overseas development. According to RBI, the money government securities and foreign exchange markets, have been stable in India and they may not be vulnerable in terms of direct and first-round effects (of global slowdown).

I completely agree with RBI that the Indian financial sector is likely to be less affected by the contagion than most other emerging market economy (EMEs), in respect of first-round or direct effects. However, the Indian equity markets, have been volatile in the recent months and that has some impact on changing sentiments.

In my opinion, India has not been contributing in the global macro economic imbalances, though it has a stake in how the issues get resolved in the near future. Further, making a case for sovereign wealth funds (SWFs), the government-owned investment vehicles. India, which is receiving lot of investment in form of SWFs is interested in the current debate.

India has benign inflationary conditions averaging around 5.2 per cent since 2004-05. However, presently both the domestic output and prices were under pressure due to recent global developments in the prices of food, fuel and metals, and the turbulence in the financial markets. India has witnessed annual average real GDP growth of over 8.7 per cent in last four years.